| The Trouble with Markets: Saving Capitalism From Itself |
| Roger Bootle, Nicholas Brealey Publishing, 2009, 276 pages, £18. |
| Roger Bootle is a clear and cogent writer, and a thoughtful man. His many years as a leading economist in and around the London financial markets have not blinded him to the City’s structural flaws. On the contrary, his latest book is in large part an attack on the financial establishment’s intellectual principles and recent practices. |
| Without any equations but with many challenging ideas, The Trouble with Markets is an excellent introduction to the big questions that surround what Bootle calls the Great Implosion of the last few years. The book has two main strands: a philosophical and practical critique of various sorts of markets and a study of the debt bubble and its aftermath. There is also a largely irrelevant chapter of practical investment advice. |
| Blind admirers of markets come in for harsh criticism. Bootle points out that in most parts of the economy extensive regulation and strong governments hold the ideological fervour for free markets in check. He blames the exceptional treatment of the financial system – as a haven for free competition – for much of the pre-Implosion excess, although he explains that in practice this competition ended in an oligopoly which enjoyed implicit government protection and extracted vast sums from the ‘creative’ parts of the economy. |
| There are hints of quite radical thinking. Bootle calls for the death of homo economicus, the narrowly self-interested creature used in neoclassical economic models, and for setting the economy on more moral foundations. In his words, “Greed is dangerous, and the en-couragement of it is stupid.” |
| He could have gone further. The discussion of competition and cooperation – he says both are needed in the economy – would have been improved by considering sociological concepts such as hierarchy and institutions. Also, in his more technical analysis, he does not fully escape from models that rely on simplistic assumptions about human nature. Still, the discussion of the Great Implosion justifies Bootle’s reputation as a top-notch British financial commentator. He expresses his own views succinctly and presents opposing arguments fairly, with many lists and welcome intrusions of humour. |
| Considering that after 80 years argument still rages about the causes of the Great Depression, Bootle’s on-the-spot analysis cannot be considered the last word. This reviewer is not fully persuaded by his views of the great deflation-inflation debate. However, for now the book is about as good as it gets. |
| There is one paradox the Bootle recognises but cannot resolve. He ultimately would like smaller governments and a less intrusive financial sector, but his remedy for the Implosion is Keynesian – many years of big government deficits with some quantitative easing. It seems that we need to move backwards before we can start going in the right direction. Bootle endorses these deviations from the desired direction because he fears an inadequate response to the Great Implosion could threaten much of what is good about the market economy. Yet even if his fears are exaggerated, The Trouble with Markets is a valiant and largely successful explanation of how to ‘save capitalism from itself’. |
| Edward Hadas |